Not too late to tap IRAs if needed

Acknowledging that the coronavirus has resulted in financial hardship for many individuals, Uncle Sam by way of the CARES Act has allowed for temporary suspension of certain rules and penalties for tapping one’s retirement plan this year if one is “qualified” under the Act, meaning either diagnosed or spouse or dependent diagnosed or proof of material adverse financial consequences to the person, spouse, or member of household due to COVID. Of note, the Act allows for CRDs (coronavirus related distributions) of up to $100,000 from an IRA or qualified employer plan (401K, 403b, etc.) without incurring a 10% penalty. The withdrawal is considered taxable but the income can be recognized over three years. The full amount of any CRD may also be re-contributed within three years from the date of withdrawal. Also, RMDs, or required minimum distributions, are waived for 2020. The waiver applies to both owned and inherited IRAs and also waives any RMD needed to be taken as a result of one turning 70-1/2 in 2019. The Act allows RMDs taken earlier in the year to be considered a CRD meaning the full amount of the RMD can be re-deposited into the plan or IRA within three years. QCDs, or qualified charitable distributions, are not affected and can be made for those who are otherwise QCD eligible. The Act does not change the 60 day rollover deadline for Roth conversions.